Burt urges 'differential' tax level

FORMER Bank of Scotland governor Sir Peter Burt has called for a "differential" tax rate in Scotland in order to attract more firms north of the border.

He said Scotland should be allowed to charge firms a low 12.5 per cent corporation tax rate to stem the "sad" decline of listed firms with headquarters here "instead of trying to jam them all in the South East".

The call comes after rigorous debate of the Scotland Bill following its publication on St Andrews Day. Although the bill represents a radical transfer of tax-raising powers to Holyrood from Westminster, it does not give the government scope to reduce the rate of corporation tax.

Burt's call goes further than the pledges made by the SNP, which rejected the Scotland Bill on the basis it does not give enough economic powers to Scotland's government. Although the SNP supports a differential tax rate, the party proposed only a 20 per cent tax in its pre-election campaign in 2007.

In the latest June budget, the coalition government proposed to lower the UK's current rate of corporation tax to 24 per cent from its current 28 per cent over four years. George Osborne told MPs: "Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them."

A 12.5 per cent tax would bring Scotland in line with Ireland, whose low rate of tax was seen as a key driver of the country's "Celtic tiger" economy before it was brought to near collapse by its banking crisis.

Burt spoke to Scotland on Sunday following the failure of the coal mining firm Scottish Resources Group (SRG) to float on the London Stock Exchange this summer. Burt had planned to be the newly listed firm's senior independent non-executive director. Others set to join the firm's board included Forth Ports chief executive Charles Hammond and former UK energy minister, Brian Wilson.

He said he was "saddened" that the float had not gone ahead. Burt said: "It is what Scotland needs, more headquarters of publicly listed firms. Look at how many we have lost in 25 years. It is very bad news."

He said the answer to the reduction in Scottish-based headquarters was to reduce the rate of corporation tax to 12.5 per cent. "It would be a step in the right direction but it is not likely," said Burt. "But what we need is a differential between England and Scotland so people are encouraged to come here."